Retail in city centers: corona clearcut becomes visible – economy

The serious consequences of the corona crisis and the increase in e-commerce for city centers can now for the first time also be proven by figures from various institutes and associations. According to the Fraunhofer Institute IAO, the vacancy rate has clearly exceeded the critical 20% mark in many cities and communities. Stationary fashion retailers are going through a particularly difficult time, according to Handelsverband Deutschland (HDE). Compared to 2019, the drop in sales this year is expected to be 37%. And that’s not even the worst-case scenario. HDE Managing Director Stefan Genth added that he considered it “critical” for the stagnant fashion business to return to pre-crisis levels again. There is “a clear change in the structure of consumption” – in fashion, but also elsewhere, clearly towards online.

This has important consequences for the value of businesses and the level of rents, even in prime locations in large cities. Fashion has by far taken the most place in shopping malls so far. Large international chains have been drawing crowds for decades. But with the various blockages, which according to Genth in Germany were the longest in Europe, rents have also fallen. According to real estate service provider CBRE, the highest rents for new rentals and extensions in Germany’s sixth largest cities at the end of 2020 were around 20% below their level at the end of 2019. Frank Emmerich, Head of Commerce for retail at CBRE Germany, says the new leases are now about the same as the 2010 lying rental price. He expects the level to stabilize this year.

Now grocery stores are attractive

Due to the pandemic, international fashion chains have largely become obsolete as stable anchor tenants in shopping malls. Investors are already reorienting themselves. “The trend in mixed-use commercial real estate is clearly towards those with grocery stores,” says Niclas Karoff, CEO of Hamborner Reit AG, a specialist in commercial real estate in Duisburg. “.

Instead of chains like Primark or H&M, it can be concluded that investors are looking for real estate with a grocery store like Aldi or Rewe. This will change not only malls and shopping centers, but also the character of city centers in the long run. Of course, in the opinion of experts, the monoculture fashion will not be replaced by the food monoculture. On the one hand, people’s hunger is not endless, and the capacity of supermarkets to expand is also limited, as leases typically last for ten years, which slows down change.

But almost all experts assume that today’s areas will be increasingly used by so-called non-food retailers like hotels, offices, coworking spaces, restaurants or for sports and games. The Fraunhofer Institute sees this change as an opportunity rather than a danger. “Consumption will decrease in a positive direction,” says Claudius Schaufler, Head of Smart Urban Environments, “there will be much more than retail. A much wider range that goes well beyond consumption ”. The prerequisite is that cities manage space more flexibly. Because digitization is advancing much faster than city centers are changing.

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Fashion retailers suffer the most.

(Photo: Blufoto / imago images / Independent Photo A)

Stefan Müller-Schleipen, co-initiator of the “Die Stadtretter” initiative, predicts that ten-year leases will no longer be concluded in the long term. They would run counter to the desired flexibility in the centers. He advocates a kind of “tinder surface”, an online platform on which anyone wishing to commit for a certain period of life can find themselves – just like on the mobile dating application.

It doesn’t have to be bad for retail sales. In Corona 2020’s first year, the industry as a whole recorded a surprising 5.7% higher. Grocery retailers in particular absorbed a lot as they were also selling things other than groceries when other stores had to close. Sales also increased because hardware stores were able to expect a newly discovered desire for DIY enthusiasts in the home office. And because online commerce was booming.

Small towns have an easier time than large ones

This year, despite all the hardships, the HDE also expects growth in the first half of the year, this time of at least 1.5%. However, the sales are distributed very differently. In the current collective negotiations with Verdi, the HDE therefore wants this differentiation to be taken into account. The union is opposed to it.

Moreover, Genth is convinced that small and medium-sized towns will find it easier to leave the difficult times of the pandemic behind. In any case, it is more difficult for the big cities because they will continue to suffer from the fact that, for example, foreign tourists stay away for the moment. The shopping streets of metropolises like Berlin and Munich are particularly affected. The HDE boss was cautiously optimistic, but also said: “The corona crisis will not be over for the retail industry for a long time.”

Not to mention the continued growth of e-commerce, which various studies also predict for the coming years – and to which city centers will have to adapt as well.

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